Breaking through the risks of Middle East conflicts and AI disruption! European software companies break through with stunning financial reports.

In this round of earnings season, European software companies performed better than expected, overcoming concerns surrounding the disruption risk of artificial intelligence (AI) and the impact of the Middle East conflict on business confidence. For example, Europe's largest software company SAP SE (SAP.US) exceeded analysts' expectations due to the continued growth in demand for cloud solutions. Analyst Anurag Rana stated that their backlog of cloud orders "should help alleviate concerns about AI disruption risk and potential impact of the Middle East conflict on deal closures." Similar issues also plagued ServiceNow (NOW.US). On the same day as SAP's earnings release, their American counterpart, ServiceNow, announced better-than-expected first-quarter results and raised their full-year performance guidance. However, the company pointed out that conflict in the Middle East weighed down on subscription revenue growth, coupled with lingering concerns in the market about AI disruption risk, investors did not feel reassured about ServiceNow. Following the earnings announcement, the stock dropped by 17.75% on April 23. SAP's stock price rebounded significantly after months of weakness, as their earnings report clearly showed that SAP outperformed under these same pressures. Deutsche Bank Aktiengesellschaft analyst Johannes Schaller wrote in a report, "SAP's earnings release is 'reassuring good news.' The rebound in cloud order backlog and growth in demand for cloud enterprise management products 'clearly indicate that demand for SAP solutions (including its AI product portfolio) remains healthy.'" In addition to SAP, the performance of the European digital transformation consulting company Capgemini SE also exceeded analysts' expectations, with organic sales growth far exceeding expectations in North America, Asia, Latin America, and the UK and Ireland. Nemetschek SE, which provides software for the construction and media industries, achieved a 17% revenue growth in the first quarter, surpassing expectations. French 3D simulation software provider Dassault Systemes SE, one of the major victims in this year's so-called "software company meltdown," also delivered a surprisingly good earnings report, with most financial indicators meeting or surpassing expectations, driving the stock price up. Analysts emphasized the company's resilience in the challenging macro environment. Citi analyst Balaji Tirupati stated that Dassault Systemes' situation indicates that software companies working with industrial clients, requiring engineering and physics expertise, and using professional data, face lower disruption risks. Performance of Swedish visualization technology company Hexagon AB and Swiss banking software provider Temenos AG also exceeded expectations. Citi analyst Pavan Daswani stated that Temenos AG benefited from growth in the US market, resilience in core banking business, progress in AI-driven capabilities, and stable sales in the Middle East region, alleviating investors' concerns. It is reported that concerns about AI disrupting industries have been rising since Anthropic introduced new tools that can automatically perform tasks in marketing and data analysis fields. There are concerns that these new AI tools may put pressure on traditional software companies, damaging their future revenue growth. The pessimistic tone of "AI disrupting everything" since February has led to continued declines in the software sector of global stock markets. The impressive earnings reports of European software companies may soothe some of investors' fears. However, cautious sentiments still exist. Tirupati stated that due to stricter year-on-year comparisons and uncertain macro environments, Dassault Systemes' execution threshold becomes higher in the second half of the year, making its growth targets seem ambitious. While optimistic about SAP, Schaller expects that "sentiment and headline risk" will continue to impact the entire software industry. Software stocks forecasted to slow earnings growth in 2026 Furthermore, data shows that despite the positive surprises in this earnings season, the earnings growth per share of European software giants is still expected to slow down this year. A team of analysts led by Hanna Greenberg at Barclays stated, "We expect the narrative of AI to shift from industry-level trends to company-level differentiation."